Regional co-operation on investment – What does it involve?

CO-OPERATION on investment within the SADC region is an integral part of achieving the overarching objectives of the SADC Treaty. Investment, be it foreign direct investment, cross-border investment or domestic investment is needed to enhance the productive capacity in the region, which is a pre-requisite for increasing trade across borders and with other parts of the world. Furthermore, investment will create employment opportunities and can therefore contribute to improvement in the standard of living of the population and poverty reduction.

In order to improve the investment climate, not only in a member state, but also in SADC at large and attract investment, SADC member states agreed on a number of principles that are contained in Annex 1 of the SADC Protocol on Finance and Investment. These principles include among others the harmonisation of policies and laws with best practices; co-operation in the area of competition policy; the promotion of small, micro and medium enterprises (SMMEs) development; and encouraging public private partnerships.

In order to monitor progress towards achieving the objectives of Annex 1, a number of commitments and indicators have been developed by member states, and these are monitored annually. Namibia has achieved four out of the eight indicators. These include: A domestic investment law is in place (the Foreign Investment Act of 1991) (currently being reviewed and will in the very near future cover domestic and foreign direct investment); the country is a member of the Multilateral Investment Guarantee Agency (MIGA); the Namibia Investment Centre was established as an Investment Promotion Agency and investment information and policies are easily accessible to investors. One of the commitments under Annex 1 is partially achieved; namely Namibia scored 5.8 in the World Bank’s Doing Business Report concerning the strength of investor protection, which is relatively close to the OECD benchmark score of 6.5.

There are other domestic policy initiatives that are in line with the SADC Protocol on Finance and Investment (FIP) and are aiming at making Namibia a more attractive investment destination, namely the review of the Double Taxation Avoidance Agreements, gradual reduction of non-mining corporate tax rate from 34 percent in 2012/13 to 32 percent in 2014/15, adoption of a public private partnership (PPP) policy and developing of a PPP legislation as well as the creation of a PPP Unit within the Ministry of Finance.

All these activities are being undertaken and expected to be finalised within the current and next Medium Term Expenditure Framework (MTEF 2015/2016-217/2018) period.
SADC published the SADC Model Bilateral Investment Treaty (BIT) Template in 2012. The non-binding SADC Model BIT aims at harmonising investment policies within the region and thus contributes to the overall objective of the SADC FIP and specifically to the objective of Annex 1. However, the new approach of attracting and regulating investment is not confined to the SADC Model BIT. The SADC Subcommittee on Investment noted in its meeting in February 2014 that there was a need to amend Annex 1 of the SADC FIP in order to modernise it and reflect experiences gained so far with its application, but also to address specific issues identified by member states such as issues concerning Investor-State Dispute Settlement and Investment Protection that were not foreseen when the current Annex 1 was drafted. The draft is currently being discussed at regional and national levels.